Archer-Daniels-Midland Company v. Country Visions Cooperative

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 21-1400
ARCHER-DANIELS-MIDLAND COMPANY,
Petitioner-Appellant,
v.
COUNTRY VISIONS COOPERATIVE,
Respondent-Appellee.
____________________
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 17-cv-0313-bhl — Brett H. Ludwig, Judge.
____________________
ARGUED NOVEMBER 29, 2021 — DECIDED APRIL 4, 2022
____________________
Before EASTERBROOK, SCUDDER, and ST. EVE, Circuit Judges.
EASTERBROOK, Circuit Judge. In 2007 Olsen Brothers Enter-
prises, LLP, granted a right of first refusal (the “Right”) on a
parcel of land in Wisconsin to the predecessors in interest of
Country Visions Cooperative. The Right had a term of ten
years and entitled Country Visions to buy the parcel by
matching any other person’s offer, should Olsen Brothers de-
cide to sell. Olsen Brothers soon dissolved, distributing its as-
sets to the partners, an event that did not trigger the Right but

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2 No. 21-1400
also did not extinguish it. In 2010 the former partners filed for
bankruptcy. They did not notify Country Visions, list it as a
creditor, or aZempt to make it a party, nor did they tell the
bankruptcy judge about the Right. An agreed plan was pre-
sented to the bankruptcy court in 2011 and approved after
perfunctory proceedings. Under the plan, the parcel’s buyer
was to acquire title free and clear of all other interests. Archer-
Daniels-Midland (ADM) emerged as the parcel’s new owner.
No one offered Country Visions an opportunity to match the
price that ADM paid.
In 2015 ADM arranged for the re-sale of the parcel, again
without offering it to Country Visions, which responded with
a suit in state court, demanding compensation for the viola-
tion of the Right. ADM then returned to the bankruptcy court,
asking it to enforce the free-and-clear aspect of the 2011 sale
by barring Country Visions from seeking any remedy in state
court. ADM relied on 11 U.S.C. §363(m), which provides:
The reversal or modification on appeal of an authorization … of a
sale or lease of property does not affect the validity of a sale or
lease … to an entity that purchased or leased such property in
good faith, whether or not such entity knew of the pendency of
the appeal, unless such authorization and such sale or lease were
stayed pending appeal.
No one appealed from the order authorizing the sale to ADM,
but this language has been read broadly to protect the inter-
ests of any good-faith purchaser. See In re Edwards, 962 F.2d
641 (7th Cir. 1992). That is the basis of ADM’s request.
The bankruptcy court denied ADM’s request, and the dis-
trict court affirmed. 628 B.R. 315 (E.D. Wis. 2021). Both judges
concluded that ADM had not acquired the parcel in good
faith, because it knew of the Right yet failed to alert the

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No. 21-1400 3
bankruptcy judge. Country Visions filed a copy of the Right
in the local real estate records; even a cursory title search
would have turned it up—indeed, did turn it up. ADM had a
copy of the title report and also knew that Country Visions
was not a party to the bankruptcy. What’s more, the bank-
ruptcy judge concluded that ADM knew that, about a week
before the sale, counsel for Country Visions got wind that
something was happening and began to inquire how he could
protect his client’s rights. Bankruptcy Judge Kelley was
tempted to deem the failure of anyone to alert her to the Right
a form of fraud on the court, but she did not set aside the sale
to ADM. The bankruptcy judge mentioned Fed. R. Civ. P.
60(b)(4) (applied through Fed. R. Bankr. P. 9024) but did not
alter or vacate the judgment approving the sale to ADM. In-
stead she just denied ADM’s proposal to stop the state litiga-
tion, which is ongoing. See Country Visions Cooperative v.
Archer-Daniels-Midland Co., 2021 WI 35 (Apr. 21, 2021) (re-
manding for further proceedings).
In the district court, and again in this court, the parties
have devoted a lot of time and space to the question whether
Country Visions knew enough, before the 2011 sale, to supply
it with the notice and opportunity for a hearing required by
the Due Process Clause of the Fifth Amendment. We do not
address that subject, however, because statutory questions
precede constitutional ones. Gulf Oil Co. v. Bernard, 442 U.S.
89, 99 (1981). This is a statutory case. If ADM did not buy the
parcel in “good faith” in 2011, then it loses no maZer what the
Constitution has to say about the sort of notice Country Vi-
sions should have received.
It seems clear that Paul and David Olsen, the debtors in
bankruptcy, proceeded in bad faith. They knew of the Right,

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4 No. 21-1400
yet they did not notify Country Visions about the bankruptcy.
They did not cause Country Visions to be served with process,
although it had an entitlement under both statute and rule to
formal notice and party status. 11 U.S.C. §363(b)(1), (d), (f);
Fed. R. Bankr. P. 2002(f). Indeed, it was entitled to at least 21
days’ notice of any proposed sale, see Fed. R. Bankr. P.
2000(a)(2), yet the liZle birdie that eventually tipped off Coun-
try Visions provided less notice than that. What’s more, the
Olsens did not alert the bankruptcy judge to Country Visions’
interest in the parcel. If anyone should be made to compen-
sate Country Visions, it is the Olsens.
Yet the current dispute pits ADM against Country Visions,
not ADM (or Country Visions) against the Olsens. The ques-
tion is whether ADM bought the parcel in good faith, not
whether the Olsens sold it in bad faith. And on that score it is
impossible to disagree with the bankruptcy and district
judges that someone who has both actual and constructive
knowledge of a competing interest, yet permits the sale to
proceed without seeking the judge’s assurance that the com-
peting interest-holder may be excluded from the proceedings,
is not acting in good faith. Constructive knowledge was es-
tablished by the Right’s presence in the real estate records.
Actual knowledge was established by ADM’s possession of a
title search report showing the Right, plus the fact that ADM
learned of Country Visions’ inquiries. At oral argument coun-
sel for ADM asserted that his client lacked actual knowledge
of the Right, but ADM’s brief does not contend that any of the
findings by the bankruptcy or district judges is clearly errone-
ous. This leaves ADM in an untenable appellate posture.
If Country Visions had been made a party, and the bank-
ruptcy judge had decided that the Right could be ignored

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No. 21-1400 5
(which is unlikely), then Country Visions would have needed
to appeal in order to protect its interests. See United Student
Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010). But it was not
a party, and a non-party cannot be expected to appeal. Deci-
sions such as In re Pence, 905 F.2d 1107 (7th Cir. 1990), on
which ADM relies, deal with the rights and obligations of lit-
igants in bankruptcy, but Country Visions never became one.
A bankruptcy judge has ample power to resolve compet-
ing claims to debtors’ assets, even to extinguish them, but
only if the claimants receive proper notice as litigants. The
bankruptcy court, which did not learn of the Right in 2011,
did not purport to extinguish it without compensation to
Country Visions.
Good-faith purchasers enjoy strong protection under
§363(m). But ADM is not a good-faith purchaser. It must de-
fend the state litigation.
AFFIRMED

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